The S&P 500 now implies an 85% chance of a US recession amid fears of a policy error by the Federal Reserve, according to JPMorgan Chase & Co. strategists.
The warning from quant and derivatives strategists is based on the average 26% decline for the S&P 500 during the past 11 recessions and follows the US benchmark’s collapse into a bear market amid concerns about surging inflation and aggressive interest rate hikes.
“In all, there appear to be heightened concerns over recession risk among market participants and economic agents, which could become self-fulfilling if they persist prompting them to change behaviour, e.g. by cutting investment or spending,” the strategists led by Nikolaos Panigirtzoglou wrote in a note. “Market concerns of a risk of policy error and subsequent reversal have increased.”
